Things to be aware of when you transfer money to and from the US

In my last post, I provided ten tips to keep in mind when you transfer money abroad, including advice about how to get the best exchange rate. In this post, I want to look at a more specific topic, namely the legal restrictions that exist concerning transferring money in and out of the United States. If you’re planning to transfer funds in or out of the US, you should certainly be aware of these.

This is the second (and last) in a series of blogposts about expat money transfers. Our guest author for these posts is Peter Lavelle. Peter is an economist at foreign exchange broker Pure FX. He’s worked in foreign exchange since 2010, and is a dedicated follower of global politics and economics. If you have any questions for him about the foreign exchange rates, he’d be delighted to help answer them.

Restrictions concerning foreign exchange transfers

The first restriction to keep in mind concerns foreign exchange transfers. By this I mean, transferring a substantial sum of money from one bank account to another one abroad, either using your bank to do so or a specialist foreign exchange broker. You might have done this if you’ve ever bought a foreign home, or transferred your savings to a foreign bank account.

1398163_the_golden_gate_bridge_The most important thing to be aware of is this. As a result of regulations imposed by the United States in 2012, foreign exchange businesses located outside the US now face much greater difficulties transferring money in and out of the States, and may be unable to do so if you contact them.

This is a result of a recent regulatory ruling by US body FinCEN (Foreign Crimes Enforcement Network.) In a press release dated February 2012, FinCEN ruled that foreign exchange businesses that deal with the US must now be liable to US laws and penalties, “even if none of its agents, agencies, branches or offices are physically located in the United States.” Failure to comply with this means that “foreign MSBs (Money Service Businesses) risk severe civil and criminal penalties.”

Given this, rather than adhere to two sets of legal requirements (that of the country they reside in, as well as the US), many businesses have simply opted to stop dealing with the US altogether. What this means for you is that, if you need to transfer money in and out of the States, your best bet is to use a US company, since it will already adhere to FinCEN’s requirements.

Restrictions concerning wire transfers

The second restriction to keep in mind relates to wire transfers. By this I mean, when you transfer relatively small amounts of money using a company like Western Union or Moneygram, without involving a bank account. You may have “wired” money back home to your family, for instance, or received it during an emergency.

1315423_usaThe restriction is this. As a result of new regulatory requirements imposed by US body CFPB (Consumer Financial Protection Bureau), many wire transfer companies will soon stop offering this service altogether. This is because CFPB has ruled that wire companies must not only inform customers of the fees they can expect to incur for sending the money, as you’d expect, but those charged on the receiving end.

Now, while this might sound reasonable, the trouble is that companies based in the US have absolutely no control about how transparent businesses in the rest of the world are. It’s virtually impossible for a US company to find out and list the receiving fees and charges for every wire transfer receiver elsewhere on the globe.

Hence, given how onerous this requirement is, many businesses have decided to simple close down the wire transfer part of their service altogether. It means, when this regulation comes into force in Spring 2013, you may have a harder time finding a place from which to wire money.

In short then, transferring money to and from the States is about to get trickier. If you’d like to find out more, feel free to check out the links below:

http://www.libertariannews.org/2012/02/16/bitcoin-targeted-by-lasted-fincen-ruling-implications-are-profound/

http://www.fincen.gov/statutes_regs/guidance/html/FIN-2012-A001.html

http://www.zerohedge.com/news/guest-post-long-arm-uncle-sam-just-got-longer

http://www.ft.com/intl/cms/s/0/31f18600-1ecc-11e2-b906-00144feabdc0.html

About the author Peter is an economist at foreign exchange broker Pure FX. He’s worked in foreign exchange since 2010, and is a close follower of global politics and economics. If you have any questions for him about the foreign exchange rates, he’d be delighted to help answer them.